Not solving the age 30 crisis at the expense of age 80

Yair Avidan, a director and former social activist who served as the Supervisor of Banks, criticizes the National Economic Council's proposal to exempt workers from mandatory pension contributions until age 40. He argues that waiving 15 years of contributions undermines future financial security, especially given economic uncertainty and the actuarial challenges facing the National Insurance Institute.

Yair Avidan, a director and former social activist who previously served as the Supervisor of Banks, analyzes in an opinion piece the proposal by the National Economic Council, headed by Prof. Avi Simhon, to exempt workers from mandatory pension contributions (6% of salary) until age 40. The paper suggests continuing employer and severance pay contributions, and according to him, would add about 500 shekels per month to young people's disposable income. Avidan argues that pensions are designed to protect against uncertainty over decades, and that money saved at a young age benefits most from compound interest. He notes that the paper's model assumes an annual return of 4% and real wage growth of 1.5%, but in reality, life expectancy may rise, returns may be low, and the labor market does not guarantee continuity. According to him, the net replacement ratio drops from 109% to 97%, and the average net monthly pension decreases from 16.6 to about 14.8 thousand shekels. He warns that the proposal simultaneously weakens both safety nets on which a person will rely in old age—the public one (the National Insurance Institute, whose pension fund is expected to be depleted by 2036) and the private one (pension savings).